A place to exercise ideas before writing about them with greater discipline.

Wednesday, May 30, 2012

Straight Talk about Globalization from Tim Cook

When Steve Jobs used to appear
at the D: All Things Digital conference, he could dazzle his audience with his
blue-sky visions, just as he would any other audience. However, as Andrew Nusca
observed in his report
from the conference for Between the Lines
on the ZDNet Web site, Tim Cook has never pretended to live in a world of
visionaries. Rather, he deals with harsh realities; and one of the realities he
has come to understand best is that of supply chain management.

He thus used his slot at the
conference to address the “made in America” question, explaining why Apple, and
just about every other major company with a product, bases production on a
globalized supply chain and why, as a corollary, there really is no place for
the United States in that chain. Nusca’s summary of his remarks is well worth
reading. Most important is that it teases out all of the down-side consequences
that Tom
Friedman either could not or would not put on the table back when he first
started riding his globalization hobby-horse.

For those who like to cut to
the chase, here is the crux of the argument as to why American manufacturing
cannot play in the world of the global supply chain:

The reason: there’s a very real
tradeoff between what’s good for workers and what’s good for business. When
push comes to shove, business wins — which is why Apple’s American
employees enjoy comparatively nice perks while employees of its supply chain
partners live in 8,000-strong dormitories, ready to be woken up at midnight to
start a 12-hour shift making new parts for an iPhone that received last-minute
design changes from California.

Imagine trying to do the same
with an American worker. Unions would never stand for it, obviously, and
chances are the rest of the family unit wouldn’t, either.

My point is not to illustrate
the benefits and drawbacks of unions, or even what’s fair; rather, I’m trying
to illustrate a landscape in which American companies can go overseas for
greater flexibility, lower price and sheer speed. So long as there are nations
in this world willing to do work others aren’t, outsourcing will exist. In the
capitalist system, businesses can’t win in the free market unless they exploit
every advantage.

We happy few who still have a
sense of history will probably have trouble reading those paragraphs
without hearing a chorus singing “The Internationale” in
the back of our collective heads. Written in the aftermath of the Paris
Commune, it was probably the first song to state explicitly that “exploit every
advantage” always meant exploiting labor to the benefit of both management and
shareholders. The basic idea was that workers around they world must group
together (“Groupons-nous”) for the “final struggle” (“la lute finale”) between
the humanity of those workers and the objective interests of capitalism.

“The Communist Manifesto”
echoed the vision of “The Internationale.” All that ensued, however, were new
governments, mostly totalitarian. The new boss was the same as the old boss,
and the workers were still the “damned of the Earth” (“damnés de la terre”).
Several generations of new bosses have now come and gone in both political and
manufacturing sectors. The state of the workers has not changed; and the sad
truth is that, if the Internet empowers anyone, it is the shareholders for whom
return-on-investment
matters more than quality-of-product, let alone anything as intangible as
worker quality-of-life. Meanwhile, “The Internationale” echoes as a faint
memory, even less memorable than “Lucy in the Sky with Diamonds.”

As an afterthought, it is worth
noting that Nusca’s perspective extended beyond Friedman to one of the other
great visionary hucksters, Richard Florida. This seemed appropriate since I
noticed that Florida’s book, The Rise of
the Creative Class, is about to be “revisited” in a
revised tenth-anniversary edition (as if a new edition could possibly add
value to the first one). Here is how Nusca took on Florida:

Manufacturing is a powerful
driver of the American economy, but it’s just one part of it. Whatever happened
to the
concept of a creative economy? (Answer: we realized we can’t win on
creativity alone. There needs to be some elbow grease, too.)

In other words the workers
figure in creativity, too. Read the stories about the Manhattan Project or the
building of the first programmable digital computers. (Yes, I am beating the
drum about history again.) You will find plenty of warrants for that claim in
those accounts. Our would-be “visionaries” have forgotten about the workers;
and, from that point of view, they are no better than heartless shareholders
and may even be significantly worse.